2023 (3) TMI 244 - AT - Insolvency and Bankruptcy

Appeal against Order on Corporate Insolvency Resolution Process upheld

The appeal was filed against an Order passed by the National Company Law Tribunal, New Delhi, relating to an application in the Corporate Insolvency ... Interim order - status quo - interlocutory relief - exercise of judicial discretion - appellate non interference unless arbitrary, capricious or perverse - protection of rights pending adjudicationInterim order - status quo - protection of rights pending adjudication - Whether the Appeal should be entertained while the Adjudicating Authority was seised of I.A. 656/2023 and had passed an interim direction restraining action on the CoC resolution. - HELD THAT: - The Tribunal noted that the Adjudicating Authority had heard parties on 01.02.2023 and 02.02.2023, had fixed further dates for hearing (initially 15.02.2023 and subsequently 01st and 2nd March, 2023) and had passed a limited direction to preserve the applicant's rights by directing that the resolution in Item No. B2 not be acted upon. Given that the Adjudicating Authority remained seised of the application and had fixed dates for its consideration, the Tribunal held that the appeal need not be entertained at that stage. The decision emphasises that interlocutory directions issued to protect rights pending final adjudication justify declining to entertain an appeal while the primary forum has the matter under active consideration. [Paras 8, 9]Appeal should not be entertained while the Adjudicating Authority is seised of I.A. 656/2023 and has fixed the matter for further hearing.Exercise of judicial discretion - appellate non interference unless arbitrary, capricious or perverse - interlocutory relief - Whether the limited direction by the Adjudicating Authority directing that the resolution (Item No. B2) may not be acted upon was arbitrary, capricious or perverse and therefore unlawful. - HELD THAT: - The Tribunal applied the principle that an appellate court will not interfere with the exercise of discretion by a court of first instance unless the discretion is shown to be arbitrary, capricious or perverse, or where settled principles governing interlocutory relief have been ignored. Having considered the record of hearings before the Adjudicating Authority and the limited nature of the direction (aimed at preserving the applicant's rights pending full hearing), the Tribunal found no perversity or arbitrary exercise of jurisdiction. The interim restraint was characterised as a status quo protective measure issued in the midst of ongoing proceedings. [Paras 10, 11]The Adjudicating Authority's direction not to act upon the resolution was not shown to be arbitrary, capricious or perverse and therefore does not warrant interference.Interim order - protection of rights pending adjudication - Whether the matter before the Adjudicating Authority requires fresh consideration on merits and whether the interim order should influence that merits adjudication. - HELD THAT: - The Tribunal observed that all contentions in I.A. 656/2023 remain to be considered and decided by the Adjudicating Authority. It emphasised that the limited interim direction was not a final adjudication of merits and explicitly stated that the interim order shall not influence the Adjudicating Authority's decision on the merits of the application. The effect is to leave the merits for fresh consideration by the Adjudicating Authority on the dates already fixed. [Paras 8, 12]The Adjudicating Authority must decide I.A. 656/2023 on merits; the interim order is protective only and shall not influence the merits adjudication.Final Conclusion: The appeal is dismissed as not maintainable at a stage when the Adjudicating Authority is seised of I.A. 656/2023 and has fixed dates for its hearing; the interim direction preserving the applicant's rights is not set aside, but the Adjudicating Authority is directed to decide the application on merits, the interim order not to influence that decision. Issues:1. Appeal against an Order dated 02.02.2023 passed by the National Company Law Tribunal, New Delhi.2. Application filed by Respondent No. 1 in Corporate Insolvency Resolution Process.3. Prayers sought in the application.4. Challenge to the Impugned Order by the Appellant.5. Arguments presented by both parties.6. Analysis of the Impugned Order and subsequent proceedings.7. Reference to a judgment by the Hon'ble Supreme Court.Detailed Analysis:1. The appeal was filed against an Order dated 02.02.2023 passed by the National Company Law Tribunal, New Delhi. The Order pertained to an application filed in the Corporate Insolvency Resolution Process by Respondent No. 1, a subsidiary of the Corporate Debtor.2. The application sought various reliefs, including quashing illegal resolutions passed in the 5th CoC meeting, staying decisions related to the change of management, and other necessary orders in the circumstances of the case.3. The Appellant challenged the Impugned Order, arguing that no specific ad-interim relief was granted, yet the Adjudicating Authority directed not to act upon a specific resolution without providing reasons. The Appellant contended that since the matter was fixed for a future hearing, there was no need for an ad-interim order at that stage.4. Both parties presented their arguments, with the Respondent's counsel stating that the Order was passed after elaborate arguments, and the direction to not implement the resolution was to maintain the status quo.5. The Tribunal analyzed the prayers made in the application and noted that the Impugned Order did not grant any interim relief as prayed. It highlighted that all contentions were yet to be considered by the Adjudicating Authority, and the hearing scheduled for a later date was postponed due to the Appellant seeking time to file a reply.6. The Tribunal referenced a judgment by the Hon'ble Supreme Court, emphasizing that appellate interference with the exercise of discretion is warranted only if it was arbitrary, capricious, or ignored settled legal principles. In this case, the Tribunal found no such arbitrary exercise of jurisdiction by the Adjudicating Authority.7. The Tribunal concluded that the Adjudicating Authority's ad-interim order should not influence the final decision on the application's merits. Consequently, the Appeal was disposed of with these observations.